Futures Fundamentals: Conclusion
AAA
  1. Futures Fundamentals: Introduction
  2. Futures Fundamentals: A Brief History
  3. Futures Fundamentals: How The Market Works
  4. Futures Fundamentals: The Players
  5. Futures Fundamentals: Characteristics
  6. Futures Fundamentals: Strategies
  7. Futures Fundamentals: How To Trade
  8. Futures Fundamentals: Conclusion

Futures Fundamentals: Conclusion


Buying and selling in the futures market can seem risky and complicated. As we've already said, futures trading is not for everyone, but it works for a wide range of people. This tutorial has introduced you to the fundamentals of futures. If you want to know more, talk to your broker.

Let's review the basics:

  • The futures market is a global marketplace, initially created as a place for farmers and merchants to buy and sell commodities for either spot or future delivery. This was done to lessen the risk of both waste and scarcity.
  • Rather than trade in physical commodities, futures markets buy and sell futures contracts, which state the price per unit, type, value, quality and quantity of the commodity in question, as well as the month the contract expires.
  • The players in the futures market are hedgers and speculators. A hedger tries to minimize risk by buying or selling now in an effort to avoid rising or declining prices. Conversely, the speculator will try to profit from the risks by buying or selling now in anticipation of rising or declining prices.
  • The CFTC and the NFA are the regulatory bodies governing and monitoring futures markets in the U.S. It is important to know your rights.
  • Futures accounts are credited or debited daily depending on profits or losses incurred. The futures market is also characterized as being highly leveraged due to its margins; although leverage works as a double-edged sword. It's important to understand the arithmetic of leverage when calculating profit and loss, as well as the minimum price movements and daily price limits at which contracts can trade.
  • "Going long," "going short," and "spreads" are the most common strategies used when trading on the futures market.
  • Once you make the decision to trade in commodities, there are several ways to participate in the futures market. All of them involve risk - some more than others. You can trade your own account, have a managed account or join a commodity pool.

  1. Futures Fundamentals: Introduction
  2. Futures Fundamentals: A Brief History
  3. Futures Fundamentals: How The Market Works
  4. Futures Fundamentals: The Players
  5. Futures Fundamentals: Characteristics
  6. Futures Fundamentals: Strategies
  7. Futures Fundamentals: How To Trade
  8. Futures Fundamentals: Conclusion
RELATED TERMS
  1. Exchange Traded Derivative

    A financial instrument whose value is based on the value of another ...
  2. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  3. Bid Wanted

    An announcement by an investor who holds a security that he or ...
  4. Cash-And-Carry Trade

    A trading strategy in which an investor buys a long position ...
  5. ISDA Master Agreement

    A standard agreement used in over-the-counter derivatives transactions.
  6. Hindsight Bias

    A psychological phenomenon in which past events seem to be more ...
  1. How do I invest or trade market indicators?

    Read about how investors can trade actual market indicators, such as the S&P 500 Index, rather than specific stocks or commodities.
  2. Why are the fair value accounting rules controversial?

    Find out about the controversial points to fair value trading, ranging from historical concerns to more modern issues in ...
  3. How can an investor make money from a decline in the electronics sector?

    Learn how shrewd investors use speculation methods that include short selling, futures and put options to profit from declines ...
  4. How can an investor profit from a decline in the aerospace sector?

    Learn about the different methods investors use to profit from a decline in the aerospace sector, including short selling ...

You May Also Like

Related Tutorials
  1. Bonds & Fixed Income

    Investing For Safety and Income Tutorial

  2. Economics

    American Depositary Receipt Basics

  3. Investing Basics

    Stock Basics Tutorial

  4. Mutual Funds & ETFs

    Top ETFs And What They Track: A Tutorial

  5. Active Trading Fundamentals

    Introduction to Stock Trader Types

Trading Center